When entering into a real estate contract, you may have second thoughts but you can’t back out of a contract for just any reason. Here are five legitimate reasons to walk away from a deal:
1. You can’t sell your current home
If you are looking for a new home while trying to sell your current home, you could run into the problem of not selling the current home in time. You should put a current home sale contingency clause in your contract with the seller to protect you in this scenario. That way if your current home doesn’t sell by a certain date in your new contracts progress, you can back out without penalty.
2. You disagree with condo or co-op board plans
When buying a property that is a co-op or condo, you have the right to review all of the board’s rules, financials, and plans for future renovations. There is a time limit on this contingency, however. You usually get one-two weeks to review all of the documentation for the complex. During that time, if you see something that you don’t like and will not be able to reasonably tolerate then you have the right to walk away. Make sure you find out what the time limit is before entering into a contract for a condo or co-op.
3. The home you’re trying to buy appraises too low
The appraisal is a very important step in closing a deal on a new home. The appraisal will estimate to you what the home is worth. If this estimate comes in lower than your offer you have every right to back out of the deal. You now have written proof that the house isn’t worth what you were going to pay for it and this is a legal and legitimate reason to bail.
4. You can’t get a mortgage
When looking to buy a new home the first thing you should do is get a mortgage pre-approval. This will come in the form of a letter from your lender stating what they are willing to loan you to purchase your home. A pre-approval letter does not guarantee you a loan however. You can be denied for the loan if your financial situation changes between the pre-approval and getting the actual loan or if the term of the pre-approval expires. The inability to get a mortgage is a legal reason to walk away.
5. Problems with the home inspection
Similarly to the appraisal, the home inspection is integral to closing a real estate deal. The inspector will check all the major systems of the home including heating, cooling, and ventilation. There are contingencies in the contract stating that all major systems must be in working order or they are subject to the seller fixing them before the deal can close. If the seller refuses to fix them or you feel the damage is irreparable, you can back out.
It is important to remember to include contingencies in the contract that allow for these loopholes. You don’t want to get stuck in a deal or risk losing money if these problems arise. Just be prepared and talk to your realtor about everything before you sign.